Patterson Products Inc. is considering an upgrade to its manufacturing equipment. The two upgrade options under consideration are shown below.

	Option 1		Option 2
Direct material cost per unit	$	50.4	$	33.6
Direct labour cost per unit	$	42	$	35
Variable overhead per unit	$	8.4	$	26.6
Fixed manufacturing costs	$	2,040,000	$	3,552,000

The selling price of the companys product is $168 per unit with variable selling costs of 10% of sales. Fixed selling and administrative costs are $3,340,000 per year.

There would be no change to the selling price, variable selling costs, or fixed selling and administrative costs as the result of the manufacturing equipment upgrade.

Required:

1. At what annual number of unit sales would Patterson Products Inc. be indifferent between the two upgrade options?

Annual number of unit sales=

2. If demand falls short of the indifference point calculated in part (1), which option would be preferred?

• Option 1

• Option 2

3. Calculate the break-even point in unit sales under each upgrade option. (Round your final answers to the nearest whole number.)

Break-even unit sales for Option1=

Break-even unit sales for Option2=